The physical capital formation is mainly an economic and technical process. It is tangible and can be easily sold in the market like any other commodity. Physical capital is separable from its owner, whereas, human capital is inseparable from its owner. It is completely mobile between countries except for some artificial trade restrictions. Physical capital formation can be built even through imports.

Difference between Physical Capital and Human Capital

Human capital is intangible; it is endogenously built in the body and mind of its owner. Human capital is not sold in the market; only the services of the human capital are sold and, hence, there arises the necessity of the owner of the human capital to be present in the place of production.

Human capital is not perfectly mobile between countries as movement is restricted by nationality and culture.

Human capital formation is to be done through conscious policy formulations in consonance with the nature of the society and economy and expenditure by the state and the individuals

Physical Capital vs Human Capital

Physical Capital

Human Capital

Physical capital is tangible.

Human capital is intangible.

It can be easily sold in the market.

It cannot be sold in the market.

It depreciates with the passage of time.


Human capital cannot be separated from the owner.

It is more mobile between Countries.


Depreciation in human capital can be reduced by making continuous investments.

Physical capital can be separated from its owner.

Human capital is less mobile between the countries.

Physical capital is the outcome of conscious decision of owner.

Formation of human capital is partly a social process and partly a conscious decision.

It can be built through imports


Human capital formation s to be done through conscious policy formulations.

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